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Company » Strategy and Competitive Advantages

Strategy

We operate with a large geographic footprint in Latin America. In January 2014, we restructured our operations under four new divisions: (1) Mexico and Central America (covering certain territories in Mexico and Guatemala, and all of Nicaragua, Costa Rica and Panama), (2) South America (covering certain territories in Argentina, most of Colombia and all of Venezuela), (3) Brazil (covering a major part of the states of São Paulo and Minas Gerais, the states of Paraná and Mato Grosso do Sul and part of the states of Rio de Janeiro and Goiás), and (4) Asia (covering all of the Philippines through a joint venture with The Coca-Cola Company). Through these divisions, we expect to create a more flexible structure to execute our strategies and extend our track record of growth.

One of our goals is to maximize growth and profitability to create value for our shareholders. Our efforts to achieve this goal are based on: (1) transforming our commercial models to focus on our customers’ value potential and using a value-based segmentation approach to capture the industry’s value potential; (2) implementing multi-segmentation strategies in our major markets to target distinct market clusters divided by consumption occasion, competitive intensity and socioeconomic levels; (3) implementing well-planned product, packaging and pricing strategies through different distribution channels; (4) driving product innovation along our different product categories; (5) developing new businesses and distribution channels; and (6) achieving the full operating potential of our commercial models and processes to drive operational efficiencies throughout our company. In furtherance of these efforts, we intend to continue to focus on, among other initiatives, the following:

To achieve these goals, we intend to continue to focus our efforts on, among other initiatives, the following:

working with The Coca-Cola Company to develop a business model to continue exploring and participating in new lines of beverages, extending existing product lines and effectively advertising and marketing our products;

developing and expanding our still beverage portfolio through innovation, strategic acquisitions and by entering into agreements to acquire companies with The Coca-Cola Company;

expanding our bottled water strategy with The Coca-Cola Company through innovation and selective acquisitions to maximize profitability across our market territories;

strengthening our selling capabilities and go-to-market strategies, including pre-sale, conventional selling and hybrid routes, in order to get closer to our clients and help them satisfy the beverage needs of consumers;

implementing selective packaging strategies designed to increase consumer demand for our products and to build a strong returnable base for the Coca-Cola brand;

replicating our best practices throughout the value chain;

rationalizing and adapting our organizational and asset structure in order to be in a better position to respond to a changing competitive environment;

committing to building a multi-cultural collaborative team, from top to bottom; and

Competitive Advantage

Market Leadership. Coca-Cola FEMSA is the largest franchise bottler of Coca-Cola trademark beverages in the world, with operations in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Argentina, Brazil and the Philippines.

Business partnerships. Coca-Cola FEMSA is working together with The Coca-Cola Company to develop more advanced joint business models to continue exploring and participating in new lines of beverages, extending existing product lines and effectively advertising and marketing our products. As partners, we have a shared incentive to capture important growth opportunities in Latin America’s fast-growing, but under-developed non-carbonated beverage segment, developing and expanding our still beverage portfolio through innovation, strategic acquisitions and by entering into agreements to jointly acquire companies with The Coca-Cola Company.

Strong brand portfolio. The company offers a powerful and wide portfolio of beverages to its customers and consumers, and continuously explores promising beverage categories to capture growth in its different markets. To get closer to its customers and help them to satisfy consumers’ expanding needs, Coca-Cola FEMSA has become a one-stop shop for its retailers by offering a complete beverage portfolio - including carbonated soft drinks, bottled water, juices, orangeades, isotonics, teas, energy drinks, milk, coffee and even beer in some markets such as Brazil.

Collaborative customer relationships. As an organization, Coca-Cola FEMSA continually looks to deepen its customer relationships. Our company is working closely with its largest clients to develop stronger multi-faceted relationships. Among the company’s initiatives, are tailoring its extensive portfolio of products and packages for their stores - based on the local market’s socioeconomic demographics, relevant consumption occasion and the store’s distinctive characteristics. We partner with our customers on multiple fronts-from knowledge management and capabilities development to go-to-market and point-of-sale execution-to ensure each and every shopper’s trip counts.

Channel Marketing. In order to provide more dynamic and specialized marketing of our products, our strategy is to classify our markets and develop targeted efforts for each consumer segment or distribution channel. Our principal channels are small retailers, "on-premise" consumption such as restaurants and bars, supermarkets and third party distributors. Presence in these channels entails a comprehensive and detailed analysis of the purchasing patterns and preferences of various groups of beverage consumers in each of the different types of locations or distribution channels. In response to this analysis, we tailor our product, price, packaging and distribution strategies to meet the particular needs of and exploit the potential of each channel.

Multi-Segmentation. We have been implementing a multi-segmentation strategy in the majority of our markets. This strategy consists of the implementation of different product/price/package portfolios by market cluster or group. These clusters are defined based on consumption occasion, competitive intensity and socio-economic levels, rather than solely on the types of distribution channels.

Client Value Management. We have been transforming our commercial models to focus on our customers’ value potential using a value-based segmentation approach to capture the industry’s potential. We have started the rollout of this new model in our Mexico, Brazil, Colombia and Central America operations.

Go-to-market strategies. We continuously evaluate our distribution model in order to fit with the local dynamics of the marketplace and analyze the way we go to market, recognizing different service needs from our customers—from traditional mom-and-pop retailers to modern hyper and supermarkets—, while looking for a more efficient distribution model. As part of this strategy, we are rolling out a variety of new distribution models throughout our territories looking for improvements in our distribution network.

Flexible sales and distribution models. We use several sales and distribution models depending on market, geographic conditions and the customer’s profile: (1) the pre-sale system, which separates the sales and delivery functions, permitting trucks to be loaded with the mix of products that retailers have previously ordered, thereby increasing both sales and distribution efficiency, (2) the conventional truck route system, in which the person in charge of the delivery makes immediate sales from inventory available on the truck, (3) a hybrid distribution system, where the same truck carries product available for immediate sale and product previously ordered through the pre-sale system, (4) the telemarketing system, which could be combined with pre-sales visits and (5) sales through third-party wholesalers of our products.

Full Operating Potential. More with less is a key part of the Coca-Cola FEMSA corporate culture. The company continually seeks to optimize manufacturing and distribution capacity to maximize operating efficiency, adapting its organizational processes to address changing competitive, economic, and sociopolitical environments. In addition, we rely on state-of-the-art market intelligence systems that enable the company to execute and refine its channel-marketing and multi-segmentation strategies, consistent with customers’ and consumers’ purchasing patterns and preferences.

Managerial expertise. We focus on management quality as a key element of our growth strategy and remain committed to fostering the development of quality management at all levels. Both FEMSA and The Coca-Cola Company provide us with managerial experience. To build upon these skills, we also offer management training programs designed to enhance our executives’ abilities and to provide a forum for exchanging experiences, know-how and talent among an increasing number of multinational executives from our new and existing territories.

Sustainable Development. Sustainable development is an important pillar of our Company’s strategy. We continually develop programs that ensure the creation of social and economic value by fostering the quality of life of our employees, promoting a culture of health and well-being, supporting our surrounding communities and minimizing our operations’ environmental impact.